PPI, Credit Protection Insurance, or Loan Repayment Insurance are all forms of payment protection insurance. They cover outstanding debts in the event that you are unable to pay them.
Banks and loan companies are the most common sellers of PPI when you apply for a loan, mortgage, or when you purchase a property.
PPI usually covers the minimum monthly loan payment for a set period of time, typically 12 months. After that, the borrower must take full responsibility for the repayments – regardless if their financial situation has improved.
Payment protection insurance has a problem. It is difficult to decide at the point-of-sale whether it is right for you. For example, if you believe you would be able to make repayments even if you didn’t have any income, it’s probably not the right insurance for you.
It could be a great option if you are concerned about your job security. However, this can get complicated as the way you were made redundant could make the claim invalid.
Only 4% of PPI-owners ever claim, and 25% of all claims are rejected.
PPI has become a controversial topic due to claims that it was often mis-sold, or worse, sold without the borrower knowing. According to estimates, 70% of adults in the UK were mis-sold payment security insurance.
Because PPI is often sold simultaneously with a person taking out a loan or any other type of credit, and often is ‘wrapped up in’ the overall fees. Many people don’t know they have it.
In May 2010, the Competition Commission stated that PPI cannot be sold simultaneously with personal loans, mortgages, or credit cards. Lenders and banks must wait at least seven days before reaching out to the borrower to offer it.
The new FSA rules mean that the PPI industry will see approximately 2 BILLION dollars worth of PPI claims. Anybody who believes they were missold payment protection insurance may file a claim to get some or all of the money they have spent.
There are hundreds of UK companies that can assess and handle claims for those who feel they have been mis-sold policies. They will usually charge a fee of around 25% to do a good job.
However, it is possible to file the PPI claim by yourself. You can claim if you have a policy in force or have been sold one within the past six years. However, you will need to provide the original paperwork.
You can start by complaining to your bank or credit provider about the plan. If they refuse to resolve your complaint, you can take it to Financial Ombudsman Service. They will provide further guidance.